Which of the Following Is Not Necessarily a Beneficial Feature

question 3

Multiple Choice

Which of the following is not necessarily a beneficial feature of the HJM binomial tree class of models?

• A)The drift term is obtained in analytical form as a function of the volatilities.
• B)The binomial tree carries the entire term structure of forward rates at each node.
• C)The tree is recombining because the drift terms are available in analytical form.
• D)The approach requires only drawing the tree out to the maturity of the option,and not to the maturity of bonds underlying a bond option.

---

Definitions:

Dramaturgy

A sociological perspective that likens social life to a theatrical performance, where individuals manage impressions during their interactions.

Erving Goffman

A sociologist noted for his work on symbolic interactionism and the concept of the dramaturgical approach in presenting self in everyday life.

Satirical Newspaper

A publication that uses satire to provide commentary on current events, politics, and societal issues, often employing humor, irony, and exaggeration.

Thomas Pynchon

An American novelist known for his complex and densely structured novels, which often mix elements of satire, postmodernism, and paranoia.